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Can you imagine your beautiful dream home being built with no structure? It doesn’t take a genius to know that it would collapse. There would be no support system, no proper plan to make it last. The same goes for money. Money needs and loves a plan, so let’s look at how we can bring some structure to your finances.
Why you need to plan your finances
Without structure, there’s no organisation, which means your money will flow to whoever puts their hand up first and shouts the loudest. By getting your money organised, you can direct it where YOU want it to go.
We’ve all been through it before. You get to the end of the month and think, how did I run out of money this quickly? Where’s it gone? It’s a really common scenario.
“Where did my money go?”
Actually, if you give it some structure, you can reduce overwhelm. And you can feel calm and in control of your money situation. Then, you’re in a better position to respond when things don’t quite go to plan.
Let’s get one thing clear though; budgets are not meant to be rigid. They don’t need to be a strict system you must abide by in order to become wealthy. A budget is there to give you loose guidance so that when the unexpected happens, you have the ability to respond quickly. So, here are some tips on how you can structure your own finances and reduce any overwhelm you may be experiencing.
Write down all of your spending
First things first: do a brain dump of all your spending.
If it helps, print out a previous bank statement, but literally, just write it down. Everything. All of your bills, regular spends, what you need money for in terms of groceries, petrol etc. Get it all down, and number it all. Even include expenses such as car insurance, if you pay it annually.
What about clothes? How much money do you think you spend on clothing? If you know the amount you spend per year, divide it by 12 to get a monthly figure.
Then, organise your list into different categories. Consider your essentials, which will include things like your mortgage or rent, and the utilities you need in order to heat and light your house, get to work, put food on the table, etc.
Next, have a couple of other boxes/categories for the stuff you regularly spend money on. So clothing might come under your “fun” budget, for example. Getting your hair and makeup and nails might also come under “fun” for you. Having a regular massage could be seen as a health expense if you’ve got a bad back, or another physical problem. And that would come under your “health” bucket.
The next step is to think about allocating money to areas such as investing, saving and getting out of debt. These are all very essential. If you are in debt, you need to allocate some money every month, to not only pay the minimum, but also to pay off your smallest debt.
So. You’ve “dumped” it all down on paper or your computer, and have everything listed. You’ve given your finances a rough plan. You’ve issued boxes and category headings to give you a total for each, and this is how you’re going to direct your money.
When you get paid, you’ll be able to allocate money towards each area depending on the amount or percentage you’ve allowed. If you use my planner, there’s an entire tutorial on how to do this, so watch the videos to get the most out of it and help to allocate your money effectively.
Is your money balancing correctly?
The next important thing to consider is to check whether your money balances every month.
Money coming in should equal money going out. Every pound should have a job. Even if that includes savings and investments (which is great, that’s what you’re aiming for).
But if your income and outgoings aren’t equal — there’s a shortfall and you’re reaching for your credit card or using your overdraft — you need to get to a point where your money will balance. Now, if that means bringing in more money, then you need to bring in more money.
Alternatively, if it means cutting things out, then you absolutely need to cut the non-essential stuff. Now that you’ve done your money brain-dumping exercise, highlight some things that you’d be willing to let go of for a while and do exactly that to get a zero balance.
What you don’t want is to be constantly catching up where you’re getting into debt because you don’t have enough money. That might mean talking to somebody and having a difficult conversation. It might mean you need to have a discussion with your credit card company, for example, or to seek help from a debt charity and tell them that you’re struggling with debt.
Or it might be that you just need to have a discussion with your partner and say, look, I haven’t got enough money to cover everything. If you’re in a situation where you’re not earning but your partner is, you may need to make some readjustments. It’s entirely possible that your partner doesn’t know you’re in this situation, so speak to them and put things right. It’ll stop you from getting more stressed and in difficult situations that you can’t get out of.
Make time to monitor your money
Once you’ve got your finances balanced out, you need to think about how often you’re going to check in with your money. I would say, check your bank balance daily or every other day. It’s good practice because it will help you to see any irregularities.
If anything changes for example, such as an unexpected bill comes out, or you’ve been a victim of fraud, you can catch these occurrences quickly and do something about them.
You don’t have to do a great deal at this point, because you will have set your budget at the beginning of the month when you got paid. What you’re doing is just making sure that everything is flowing as it should be. Once a week, you could have a quick look to see what bills are coming out, and make sure you’ve got enough money in your account to cover those bills.
Then perhaps on a monthly basis, you can reassess your budget. For example, did you fit in everything that you wanted to? Or did you overspend in certain areas? Perhaps you hadn’t quite allocated enough money for something. If so, change the budget plan for the next month, flex it and see what happens. Maybe you’ve got birthdays coming up and need to reallocate some resources. It’s about being flexible and fluid with your budget rather than being rigid and unable to plan for the next month.
Plan your personal money audit
Every six to twelve months, do a proper audit of everything. Here are some things to consider:
Check your bills
Look at all of your bills. When was the last time you checked to make sure you’re on the cheapest, or best tariffs? You might want to move to a different energy brand because you’ve heard they focus more on green energy, for example.
Assess your investments
Also, could you put more money into your investments? Allocate more money into savings? Look at how much debt you’ve paid off. It’s so exciting to see that balance coming down and to see the debt depleting. Think about what you’ve got coming up in the next 12 months that you need to focus on.
Check your net worth
What I like to get people to do is calculate their net worth as well, so they can see how it’s changing with time. I do mine monthly because I’m a bit of a money geek, but you’d expect that from me, right?
You don’t have to do it that often; you could check yours every six months if you wanted to, just to check in and make sure that your net worth is going in the right direction, not in the wrong direction!
Monitor your credit score
I like to check my credit score on a monthly basis, but some people prefer to do it on a six monthly, or twelve monthly basis; whatever works for you. One thing I will say is that everybody is unique. There is nothing there’s not going to be one size fits all for everybody. It’s just a sort of a rough idea about what might work for you.
Finding the right tools to manage your money
If you’re a spreadsheet person, you might prefer to manage your money this way. Or, you might want to use a notebook or a planner; whatever works for you. However, you do need to do something. It’s like dieting. All the diets work, but some diets work better for others than they do for you as an individual.
The right kind of help to plan your finances
I have a free webinar coming up which talks all about our wealth DNA and unlocking the secrets to maximising our success with money. I’d love for you to come along, so make sure you sign up and don’t miss it! We’ll have a discussion about your money personality, how that fits into your life and how you can literally pave the way to a much easier future when it comes to your finances.
Book a free strategy call
If you’re not sure about where this all fits in with you personally, you can book a 15 minute strategy session with me and we can have a look to see what your next step is. These sessions are really, really valuable. So many members have enjoyed being able to talk openly about their finances, and of course, it’s all completely confidential.
Having someone take an external view of your finances, with some suggestions and help to make a few tweaks, suddenly makes life a lot easier. I know I value my partner’s perception when I talk stuff through with him, because he often gives me a different insight that I hadn’t considered.
Remember, money loves structure. So if you don’t take anything else away from this post, just fix that in your mind. The more structure you can give your money, with giving every pound a job, the better you’ll do than if you just leave it to chance. There will be somebody out there who will know how to structure their money and as money tends to flow to those who value it most, that won’t necessarily serve you.
If you have any questions, feel free to find me on any of my social channels and ask away. Take care, and I’ll catch up with you again soon!
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